[House Report 115-275]
[From the U.S. Government Publishing Office]


115th Congress   }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session     }                                      {      115-275

======================================================================



 
       SECURITIES AND EXCHANGE COMMISSION OVERPAYMENT CREDIT ACT

                                _______
                                

August 15, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1257]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1257) to amend the Securities Exchange Act of 
1934 to require the Securities Exchange Commission to refund or 
credit excess payments made to the Commission, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Securities and Exchange Commission 
Overpayment Credit Act''.

SEC. 2. REFUNDING OR CREDITING OVERPAYMENT OF SECTION 31 FEES.

  (a) Definitions.--In this section--
          (1) the term ``Commission'' means the Securities and Exchange 
        Commission;
          (2) the term ``national securities association'' means an 
        association that is registered under section 15A of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78o-3); and
          (3) the term ``national securities exchange'' means an 
        exchange that is registered as a national securities exchange 
        under section 6 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78f).
  (b) Credit for Overpayment of Fees.--Notwithstanding section 31(j) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78ee(j)), and subject to 
subsection (c) of this section, if a national securities exchange or a 
national securities association has paid fees and assessments to the 
Commission in an amount that is more than the amount that the exchange 
or association was required to pay under section 31 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78ee) and, not later than 10 years 
after the date of such payment, the exchange or association informs the 
Commission about the payment of such excess amount, the Commission 
shall offset future fees and assessments due by that exchange or 
association in an amount that is equal to the difference between the 
amount that the exchange or association paid and the amount that the 
exchange or association was required to pay under such section 31.
  (c) Applicability.--Subsection (b) shall apply only to fees and 
assessments that a national securities exchange or a national 
securities association was required to pay to the Commission before the 
date of enactment of this Act.

                          PURPOSE AND SUMMARY

    On February 28, 2017, Representatives Gregory Meeks and 
Randy Hultgren introduced H.R. 1257 to allow national 
securities exchanges registered with the Securities and 
Exchange Commission (SEC) to offset previous overpayments made 
to the SEC against future fees, under a 10-year statute of 
limitations. The bill applies only to those overpayments made 
prior to the legislation's date of enactment and provides the 
SEC with the legal authority to refund any overpaid fees.

                  BACKGROUND AND NEED FOR LEGISLATION

    Under Section 31 of the Securities Exchange Act of 1934 
(the '34 Act), national securities exchanges and other self-
regulatory organizations (SROs) owe proportional transaction 
fees to the SEC for the cost of supervising and regulating such 
transactions. In 2008, the Chicago Stock Exchange discovered it 
had overpaid $154,048 for 2007 Section 31 fees. Similarly, in 
2014, NASDAQ discovered it had overpaid almost $750,000 for 
2013 Section 31 fees. These exchanges overpaid these fees out 
of an abundance of caution, rather than risk an enforcement 
action for underpayment.
    The SEC, however, has not refunded these overpayments 
because the SEC has interpreted the '34 Act as not granting the 
SEC the authority to refund the overpayment of Section 31 fees. 
To correct this problem, H.R. 1257 would allow the SROs to 
offset previous Section 31 overpayments against future Section 
31 fees, under a 10-year statute of limitations.
    In a 2013 letter to the Committee on Financial Services, 
former SEC Chair Mary Jo White noted that, ``We recommend that 
the Commission be permitted to effect refunds by allowing an 
SRO to offset previous Section 31 overpayments against future 
Section 31 payments . . . This would clarify that the 
Commission has the authority to follow this approach to effect 
such refunds as an alternative to using appropriated 
funds.''\1\
---------------------------------------------------------------------------
    \1\Letter from SEC Chair Mary Jo White to Chairman Jeb Hensarling 
(May 15. 2013).
---------------------------------------------------------------------------
    At an April 29, 2015 Capital Markets and Government 
Sponsored Enterprises Subcommittee hearing, Mr. Tom Quaadman of 
the U.S. Chamber of Commerce's Center for Capital Markets 
Competitiveness testified that:

        Although the SEC makes at least annual adjustments to 
        the Section 31 fee rate, entities need to do a fair bit 
        of projecting what their responsibility will be for a 
        given time period. SROs and the national exchanges are 
        therefore caught in a bit of a Catch-22 when it comes 
        to Section 31 fees. If they underpay the required 
        amount, they are subject to enforcement action by the 
        SEC. If they overpay the amount, there is no way for 
        them to be refunded or to have the overpayment amount 
        credited against future payments. This legislation 
        would provide a degree of certainty for SROs and 
        exchanges by allowing such overpayments to be credited 
        against future Section 31 responsibilities. Since these 
        payments are often passed on to the investing public, 
        allowing for such credits would ultimately benefit 
        investors who trade in the public markets.

                                HEARINGS

    The Committee on Financial Services held a hearing during 
the 114th Congress, on April 29, 2015, titled ``Legislative 
Proposals to Enhance Capital Formation and Reduce Regulatory 
Burdens,'' at which this matter was examined.

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
March 9, 2017, and ordered H.R. 1257 to be reported favorably 
to the House as amended by a recorded vote of 59 yeas to 0 nays 
(recorded vote no. FC-35), a quorum being present.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. An 
amendment offered by Representative Meeks was agreed to by a 
voice vote. The first and only recorded vote in Committee was a 
motion by Chairman Hensarling to report the bill favorably to 
the House as amended. That motion was agreed to by a recorded 
vote of 59 yeas to 0 nays (recorded vote no. FC-35), a quorum 
being present.


                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 1257 
will remedy the SEC's inability to provide refunds or credit 
for previous overpayments of Section 31 fees by statutorily 
obligating the SEC to allows the SROs to offset previous 
Section 31 overpayments against future Section 31 fees, under a 
10-year statute of limitations.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 CONGRESSIONAL BUDGET OFFICE ESTIMATES

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 4, 2017.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1257, the 
Securities and Exchange Commission Overpayment Credit Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                            Keith Hall.
    Enclosure.

H.R. 1257--Securities and Exchange Commission Overpayment Credit Act

    Under current law, the Security and Exchange Commission 
(SEC) is required to collect fees and assessments from national 
securities exchanges to cover the agency's costs of regulating 
such exchanges. The SEC is required to adjust the annual rates 
that associations and exchanges must pay so that collections in 
a given year equal the amount appropriated to the agency for 
that year. H.R. 1257 would require the SEC to refund any 
overpayment of such fees that an exchange identifies within 10 
years of the overpayment and that occurred before the enactment 
of the bill by lowering future collections due from an exchange 
by the amount of any previous overpayment by that exchange.
    Based on an analysis of information from the SEC on the 
amount national securities exchanges estimate they have 
overpaid in the past, CBO estimates that enacting H.R. 1257 
would initially reduce fees by $3 million to retroactively 
refund overpayments. For this estimate, CBO assumes that H.R. 
1257 will be enacted, and that those retroactive fee reductions 
will occur, before the end of 2017. Because those reductions 
would not be contingent on further legislation, CBO estimates 
they would increase direct spending by $3 million in 2017. 
Because enacting the bill would affect direct spending, pay-as-
you-go procedures apply. Enacting H.R. 1257 would not affect 
revenues.
    In years after 2017 the SEC may need to provide additional 
refunds by reducing collections from exchanges for overpayments 
that have not yet been identified. Such reimbursements would 
result in a reduction in amounts collected by the SEC in the 
year in which they occur. CBO estimates that any resulting net 
reduction in fees after 2017 would be insignificant in any 
given year over the 2018-2027 period.
    The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting 
direct spending or revenues. The net changes in outlays that 
are subject to those pay-as-you-go procedures are shown in the 
following table.

         CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1257, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON MARCH 9, 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             By fiscal year, in millions of dollars----
                                           -------------------------------------------------------------------------------------------------------------
                                             2017    2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2017-2022  2017-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact............       3       0       0       0       0       0       0       0       0       0       0         3          3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    CBO estimates that enacting H.R. 1257 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 1257 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    On April 4, 2017, CBO transmitted a cost estimate for S. 
462, the Securities and Exchange Commission Overpayment Credit 
Act, as reported by the Senate Committee on Banking, Housing, 
and Urban Affairs on March 13, 2017. The two bills are similar 
and CBO's estimate of their budgetary effects is the same.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    H.R. 1257 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    DUPLICATION OF FEDERAL PROGRAMS

    Pursuant to section 3(c)(5) of rule XIII, the Committee 
states that no provision of H.R. 1257 establishes or 
reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   DISCLOSURE OF DIRECTED RULEMAKING

    Pursuant to section 3(i) of H. Res. 5, 115th Cong. (2017), 
the Committee states that H.R. 1257 contains no directed 
rulemaking.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section cites H.R. 1257 as the ``Securities and 
Exchange Commission Overpayment Credit Act.''

Section 2. Refunding or crediting overpayment of Section 31 fees

    This section requires the SEC to allow SROs to offset 
previous Section 31 overpayments against future Section 31 
fees, under a 10-year statute of limitations.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 1257 does not repeal or amend any section of a 
statute. Therefore, the Office of Legislative Counsel did not 
prepare the report contemplated by Clause 3(e)(1)(B) of rule 
XIII of the House of Representatives.

                                  [all]